If you or your business have constructed, renovated or purchased real estate, then a Cost Segregation Study could be invaluable to your short-term cash flow and long-term financial strategy. A Cost Segregation Study is the process to identify personal property assets that often get buried or lumped together with real property assets for tax reporting purposes.
Generally, an investment in real estate is depreciable over 39 or 27.5 years. The primary goal of a Cost Segregation Study is to identify all construction-related costs that can be depreciated over 5, 7 and 15 years. This, in turn, accelerates depreciation expense and decreases taxable income. As a taxpayer, you pay less tax during the early stages of a property's life, providing you with improved after-tax cash flows.
1. Reduces taxable income and creates a current tax savings.
2. Generates immediate increase in cash flows through accelerated depreciation deduction.
3. Provides an opportunity to claim “catch up” depreciation on previously misclassified assets.
The ideal time for a Cost Segregation Study varies depending on the client’s tax situation. Our team of engineers and tax professionals work closely with our clients to determine the right timing for the study. Cost Segregation opportunities include:
1. New Construction
2. Acquisition of an Existing Property
3. Renovation, Remodel or Expansion of an Existing Building
4. Leasehold Improvements
5. Sale of Property
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